Question 5

Depreciation Calculation: JKL Inc. purchased machinery for $100,000 on January 1, 2023. The machinery has a useful life of 10 years and a residual value of $10,000. The company uses the straight-line method of depreciation.

Requirements:

1. Calculate the annual depreciation expense.
2. Determine the book value at the end of 5 years.
3. Compute the depreciation expense if the company uses the double-declining balance method for the first year.
4. Assess the impact on net income if the company used the units of production method assuming 20,000 units were produced in the first year.